Sheila Bair quits board of largest Spanish bank

Sheila Bair has resigned from the board of Banco Santander
SAN, -1.54%, the Financial Times reported on Thursday. Bair, the former head of the Federal Deposit Insurance Corporation during the financial crisis, was a director for the last 18 months at Spain’s largest bank, a position some criticized as hypocritical given her significant criticism of the actions of banks that led to the crisis. Santander is the first foreign bank to fail the Dodd-Frank mandated bank stress tests for the second consecutive time. Her statement said she is leaving to focus on a new role as president of Washington College in Maryland and is ending an advisory role with the Boston Consulting Group. She will reduce her commitment to law firm DLA Piper, but keep her board positions at Thomson Reuters
TRI, +1.17%
, Host Hotels
HST, +0.89%
, and it Bit USA, a bitcoin exchange. The CFO of Santander’s U.K. subsidiary also quit this week.

Earlier in July, Blythe Masters, a former longtime executive at J.P. Morgan Chase & Co.
JPM, +0.43%
, was named chairwoman of Santander Consumer USA, the bank’s subprime auto lender that faces scrutiny by U.S. regulators, including the Federal Reserve, and an investigation into its securitization of its auto loans.

President Obama’s solicitor general filed a petition with the U.S. Supreme Court asking the justices to review an insider-trading decision by a federal appeals court that overturned two convictions and set a higher standard for proving the financial crime, The Wall Street Journal reported on Thursday. The likelihood of the Supreme Court reviewing United States v. Newman is particularly high, says law firm Orrick, which wrote in a bulletin that the Supreme Court grants such a request, called a “writ of certiorari,” in nearly three of four cases filed by the solicitor general.

In Newman, the appeals court said U.S. Attorney Preet Bharara’s office, which prosecuted the case, had failed to prove that the tipper, a corporate insider who has a fiduciary duty to his company but nonetheless agrees to provide material nonpublic information to a tippee, the outsider, didn't receive any personal benefit from passing along the information and, even if the tipper had, there was no indication the defendants knew the tippers would receive such benefit. Orrick says the Justice Department and the Securities and Exchange Commission have lately pursued remote tippees “aggressively” based on “increasingly vague articulations” of what constitutes a “personal benefit.” It will probably be sometime this fall before we know if the Supreme Court will accept the case and, if so, oral argument will likely be held early in 2016, with a decision issued by the following June.

There also are initiatives in Congress to clarify the issues legislatively. In response to Newman, three bills were introduced in Congress that would prohibit anyone from trading on confidential information, regardless of whether he or she knows who the inside source is or whether the inside source received a personal benefit in exchange for disclosing the confidential information.

The Group of Thirty, a nonprofit body chaired by a former president of the European Central Bank, strongly criticized standards of conduct across the banking industry, in a report to be published in New York, the Financial Times reported Thursday. The group is calling for boards to align executive pay to improvements in bank culture to ensure that the “tone at the top” has “a clear and consistent echo from the bottom”. The group recommends the establishment of an explicit link between the pay of the chief executive and the cultural standards of the bank.

The article quotes New York Fed President Bill Dudley, who defines culture as “the implicit norms that guide behavior in the absence of regulations or compliance rules,” and who warned in a speech last October that unless banks make more serious efforts to improve standards, they will face ever-firmer pressure to be broken up. Section 956, one of a package of Dodd-Frank rules covering executive compensation that aren't yet finalized would prohibit a broad group of financial services firms from offering any type of incentive compensation that the final rule says is excessive or that could expose the organization to material financial loss as a result of inappropriate risk taking.

Hillary Clinton personally negotiated a tentative legal settlement between UBS Group AG
UBS, -3.01%
and the Internal Revenue Service while Secretary of State in 2009, and then UBS significantly increased its donations to Clinton’s foundation, The Wall Street Journal reported on Thursday. The article suggests an uncomfortable connection between Clinton’s official and personal interests. Donations by UBS to the Clinton Foundation surged from $60,000 in 2008 to $600,000 by 2014, UBS also joined the Clinton Foundation to launch entrepreneurship and inner-city loan programs, through which it lent $32 million, and paid former president Bill Clinton $1.5 million to participate in a series of speeches for a UBS forum. UBS is his biggest single corporate source of speech income disclosed since he left the White House, says The Wall Street Journal. UBS has since paid more fines to the U.S. and U.K. regulators for its involvement in the Libor interest-rate-rigging scandal, the foreign-exchange-rigging scandal, breaching the terms of its nonprosecution agreement over the Libor fraud with the currency-fraud case, a record fine for disclosure issues in its equity dark pool, and significant control breakdowns that allowed a “rogue” trader to lose $2.3 billion at the bank in 2011.

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